Advantages of a USDA B&I Loan

USDA Business and Industy Loans have a number of advantages:

• Because 80% of the loan is guaranteed by the USDA, you can actually get a bank to approve your commercial loan, which is no small thing during the Great Recession.
• USDA B&I lenders will often lend up to 80% loan-to-value (and sometimes even 90% LTV) on rural commercial buildings.  Banks making conventional commercial mortgage loans will seldom lend higher than 70% loan-to-value ratio, and during the Great Recession, many banks are limiting their conventional commercial mortgage loans to just 58% to 65% LTV.
• Because USDA Business and Industry loans carry a government guarantee, the interest rate is often 50 basis points (1/2%) lower than the rate demanded by conventional commercial mortgage lenders.

• USDA Business and Industry loans enjoy a delicious 20-year term.  Most conventional commercial mortgage loans are limited ot a maximum of 10 years, and quite often a bank will only approve a 5-year conventional commercial real estate loan.  This means that the borrower will have to pay for new points and new third party reports (appraisal report, toxic report, and title report) every 5 to 10 years.  This can get very, very expensive.  Even more importantly, you could have your conventional commercial mortgage loan balloon during a horrible recession.  This could be a disaster if all of the banks in town are too frightened to refinance your balloon payment.